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Unemployment Insurance, the Recession, and Race

There are significant racial disparities in receipt of unemployment benefits. While national unemployment hovers close to 10 percent, African American and Latino unemployment rates top 15 and 12 percent, respectively. Unfortunately, Blacks and Latinos are also 25 percent less likely than unemployed Whites to receive benefits, due in large part to their disproportionate representation among low-wage, part-time, and seasonal workers, who are ineligible for or poorly covered by unemployment benefits.

The impacts of unemployment on workers and families are severe and both near and long-term. The risks for teens and young adults in the current recession are especially notable. Foregone work experience and skill development are among the more immediate consequences of high youth unemployment. Over the long run, this lack of experience could lead to less upward mobility and fewer promotions, resulting in significantly lower lifetime earnings. Even more broadly, the overall productivity and entrepreneurship of the U.S. economy could suffer from the employment outlook of one or more “recession generations.” Unemployment benefits can mitigate some of these and other negative effects of unemployment.

States are facing huge shortfalls in unemployment trust funds. Forty states will be insolvent by 2013 and require more than $90 billion in federal funding to maintain benefits payments. States will continue to face high demands on unemployment insurance programs as high rates of unemployment are expected to continue over the next several years. The immediate and long-term negative effects on individuals, families, and communities — both the unemployed and the employed — will likely be devastating if dramatic corrective actions are not taken.